Competing in the Network Era

Competing in the Network Era

Are you and your CEO ready for the fact that just about everything will become a node in a network?

Soon, more devices than people will be connected. This signals a "tipping point". Beyond it lies the Network Era, where the falling cost of computing power and network bandwidth will make it possible to connect almost anything, from refrigerators to elevators. When everything has the potential to become a node in a network, most industries will be affected by seismic change.

The music industry, has already felt the impact of the Network Era through phenomena such as Napster, which gave music buffs a way to digitally share music via the Internet. Since then overall sales of compact discs (CDs) have fallen around 10 per cent a year.

A few months ago, a global group of members of Gartner's CIO Executive Program (EXP) met in San Francisco to pinpoint the opportunities for their enterprises. This might sound like strange timing, considering the state of the economy (especially in the US and parts of Europe) and lower levels of IT spending. But despite the "gloom and doom" at the time, we know there is always a percentage of companies with their eye to the future - the ones who will be ahead of the pack in 2004 and beyond.

We were joined by Professor N Venkatraman from Boston University, who has been working on the business potential of the combined impact of computing, networks and bandwidth. We spent two days working in interactive groups to assess how the enterprises represented might take advantage of the Network Era, before it takes advantage of them. Then we followed up with a series of more detailed case studies.

The conclusion was that, in the Network Era, competitive advantage will give way to collective advantage. And CIOs have an important role to play in preparing their business counterparts for the opportunities now rather than dealing with this defensively later.

CIO involvement with the business can be summarised into three of our CIO imperatives: anticipate, strategise and organise.

Anticipate: Understand the opportunities from the combined impact of three laws.

Network Era opportunities will be generated by the compounded effect of three laws: Moore's (growing power of computer chips), Metcalfe's (growing value of a network ) and Gilder's (growing communications bandwidth).

Moore's law states that the power of a chip doubles every year and a half. First propounded in 1965 by Gordon Moore, a founder of chip-maker Intel, the law has proved to be true ever since. Despite the challenge of dissipating heat from the millions of transistors crowded together on a single chip, Intel is confident it will be able to maintain the pace with silicon for at least another 15 years. Recent breakthroughs in molecular electronics by researchers at Hewlett-Packard and IBM lead many experts to believe that Moore's law may hold true well past 2020.

Robert Metcalfe, the inventor of Ethernet and the founder of 3Com, a telecom company, states that the value of a network rises with the square of the number of users. The value to an individual of, say, a phone or a fax, is proportional to the number of friends and associates who also have phones or faxes. Double the number of phones or faxes, and you square the network's value.

Gilder's law states that communications bandwidth doubles every six months. George Gilder, the visionary founder of Telecosm, asserts that "bandwidth grows at least three times faster than computer power". Today, more information can be sent over a single cable in one second than was sent in one month over the entire Internet in 1997.

On its own, the effect of each law is dramatic. Taken together, their effect is compounded. Most products are information rich, but that information has not been exploited. In the Network Era, it will be, and this is what's going to transform industries.

The three laws impact processes, products and services. Consider the processes in agriculture, for instance. Processes such as planting and harvesting are becoming increasingly automated. Farm implements such as tractors are being fitted with low-cost, powerful sensors (Moore's law) to assess soil properties such as moisture content, nutrients and density. The tractors connect via satellite to distributed information services (Gilder's law) such as weather data, crop genetic databases and information feeds from fertiliser companies (Metcalfe's law). The results are more efficient agricultural processes, better use of seeds, fertiliser, water and fuel, and consistently higher crop yields.

Next, consider digital camera products. Digital images can be edited, sequenced, filed and catalogued (Moore's law) using powerful but low-cost equipment. The images can be transmitted to a growing range of connected products (Gilder's law), enabling further processing and transmission (Metcalfe's law). Over time, increasing power, value and bandwidth will enable mobile phones to exchange video clips of increasing resolution. The result: photography is changing from "capturing the moment" to "sharing the occasion".

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